IFRS PRACTICAL IMPLEMENTATION GUIDE AND WORKBOOK

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Wiley IFRS: Practical Implementation Guide and Workbook

• Tran sfers to and from inventories and owner-occupied property • Other changes

7.2 .2 When a valuation for an investment property is adjusted to avoid double counting of asse ts such as equipment that may be recognized separately, a reconcil iation of the adjustments shall be disclosed. 7.2.3 When fair value cannot be measured reliably and the asset is stated in accordance with lAS 16, such assets shall be disclosed separately from those at fair value. In addition to the move– ment disclosures set out above, disclosures shall be made of the • Description of propertie s stated in acco rdance with lAS 16 • Expl anation as to why fair value cannot be reliably measured • Range of estimates, if possible , within which the fair value is highl y likely to fall • Disposals of investment property not carried at fair value 7.3 Cost Mo de l For investment propertie s measured under the cost model , an entity shall disclose • Depreciation methods used • Useful lives or depreciation rates used • A reconciliation of the opening and closing gross carry ing amounts and the accumulated de– preciation and impairment losses, showing • Additions, showing separately acquisitions, subsequent expenditure, and additions through business combinations • Asse ts classi fied as held for sale under IFRS 5 • Impairment losses recognized and reversed • Net exchange differences • Transfers to and from inventories and owner-occupied property • Other changes • The fair value of investment property and, if fair value cannot be reliably measured • Explanation as to why fair value cannot be reliably measured • Range of estimates, if possible, within which the fair value is highly likely to fall • Disposals of investment property not carried at fair value P r actical Ins ight Even if an enti ty measures an investment property under the cost model it is still required by lAS 40 to disclose the "fa ir value" of such an investment property measured at cost. (Such a disclosure is usually made in the notes to the financial statements). This may not appear to be an unusual requirement for disclos ure of fair value in these days when fair value accounting seems to be the order of the day, but from the perspective of entities that are required to make such a disclosure such a requirement of lAS 40 is definitely being construed as an impractical and an expensive choice to implement. In other words, while lAS 40 is apparently giving an entity a free choice of measuring investment properties using either the cost model or the fair value model, this requi rement to disclose fair value (despite allowing an entity to measure the investment property under the cost model ) compels it to undertake an exercise to fair value an investment propert y that it is carry ing at cost in its books of account. In practice, this manda– tory d isclosu r e under lAS 40 is seen by some as a really onerous requ irement of the standard since it makes it incumbent upon an entity to undertake a fair valuation exercise even in a case when an entity is carryi ng an inves tment property at cost in its books of accounts (as allowed by the standard as a f ree choice) and only for the purposes of satisfying this disclosure require– ment the entity has to undert ake the same kind of a fair valuation exercise that it would other– wise have gone through had it chosen to measure this investment property under the fair value model. Compare this to the r ecommended d isclosur e requirement under lAS 16, paragraph 79, in case